Signal Mountain, TN asked in Estate Planning for Tennessee

Q: Do distributions to a beneficiary of an IDGT turn off grantor trust status

Need to determine if distributions to a beneficiary of an IDGT would turn off grantor trust status and cause a portion the income for that year to be taxed to the beneficiary rather than the grantor.

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1 Lawyer Answer
Nina Whitehurst
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  • Estate Planning Lawyer
  • Crossville, TN
  • Licensed in Tennessee

A: Typically it is the other way around. That is, income is taxed to the grantor rather than the beneficiary. This is actually considered a feature rather than a bug. But not all IDGTs are created equal. The only way to know for certain with respect to any given IDGT is for an attorney to review the trust instrument and look for the aspects that create grantor trust status with respect to the taxation of income.

Anthony M. Avery agrees with this answer

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